Readers Report
This Interest Rate Is No Passing Fad
In "Is there really a perfect rate of interest?" (News: Analysis & Commentary, Apr. 22) Rich Miller picks the wrong target. The NAIRU (nonaccelerating-inflation rate of unemployment), which he disparages, worked exactly as expected in the 1990s. Compensation gains per employee, which slowed to only 1.9% per year in 1995, started to rise in 1996, shortly after unemployment moved below 6%, and reached 5.6% by 2000. Price inflation stayed low because of the productivity growth surge and the strong dollar. The Fed recognized this and held interest rates close to the natural rate in 1996-98, but then raised them too slowly in 1999-2000, allowing the economy to overheat and the tech-stock bubble to inflate.
The "natural rate of interest," which Miller describes as the "latest monetary fad," goes back to Swedish economist Knut Wicksell, who wrote his masterpiece Interest and Prices in 1898. Buried by John Maynard Keynes in the 1930s, the concept reemerged in the past 20 years as part of the synthesis of Keynesian and monetarist ideas. Miller is correct that it is often a difficult concept to use. But right now, with the economy recovering sharply and the federal funds rate at least 2% below anyone's estimate of the natural rate, there is little doubt that rates have to rise.
John Calverley
Chief Economist and Strategist
American Express Bank
London
France: The Price of Ignoring Reform
"France: Who speaks for youth?" (International Business, Apr. 22) could not have been more timely, considering the political earthquake that shook France on Sunday, Apr. 21.
Whatever the result of the legislative elections in June, the new French President, government, and parliament really need to get their act together and pass much needed reforms--restoring the authority of the state, overhauling the soon-to-be-bankrupt retirement system, streamlining the public services and administration, reforming the educational system, and freeing up the economy.
If they keep delaying these unavoidable reforms over and over, the worsening situation will lead to more unrest and, probably, to an extremist rule in five years. Instead of lamenting the situation in endless speeches about democracy, French politicians should return to their history books and read about the Weimar Republic of Germany. A weak, unresponsive democracy unable to improve the economic fate of its people can become fertile soil for extremists of all kinds.
Philippe Domart
New York
A Closer Look at HCA
In "HCA is getting its strength back" (The Corporation, Apr. 22), the author refers to "weekend golf vacations" being offered to doctors who practice in our hospitals. Federal law sets strict limits on the business courtesies that hospitals may give to their medical staffs, and we have diligently implemented those laws. Such laws, as we understand them, would preclude weekend golf vacations. Our policies have for many years prohibited providing any entertainment to our referring physicians that involves travel or overnight lodging. This is only a small part of a comprehensive ethics and compliance program at HCA Inc., which we believe is regarded as an industry model.
Alan R. Yuspeh
Senior Vice-President for
Ethics, Compliance &
Corporate Responsibility
HCA
Nashville
Your story implied that a recent court decision overturning the conviction of two former HCA executives for Medicare fraud reflected on HCA's culpability in a related civil-fraud case. That is wrong. HCA in 2000 pleaded guilty to criminal charges involving the same false claims at issue. For that crime and others, it paid a total of $95 million. Nothing in the decision absolves HCA from its outstanding civil liability for the same charges. The ruling focused only on the court's interpretation of the individuals' participation in HCA's wrongdoing.
John R. Phillips
Washington
Editor's note: The writer is a lawyer representing former HCA employees who have sued the company under the whistle-blower law.
Chop Down the Tariffs on Canadian Lumber
President Bush caught flak for import tariffs on steel but not for the crippling duties on Canadian softwood lumber. It should have been the other way around ("Bush trade policy: Crazy-quilt like a fox," News: Analysis & Commentary, Apr. 15). The U.S. lumber industry's allegations that Canadian governments unfairly subsidize lumber production don't stand up to scrutiny. The British Columbia provincial government, for example, realizes substantial net revenues from its forests annually. By contrast, the U.S. government is losing money on heavily subsidized timber from federal lands sold to U.S. lumber companies. And now the kicker: The U.S. actually needs Canadian lumber. As a result of large-scale conservation efforts late in the past century, America is short on timber.
How U.S. lumber--a "2x4" industry in the overall scheme of the American economy--could persuade the U.S. government to raise trade barriers against Canadian lumber is a mystery to this Canuck.
Joseph Z. Bako
Vancouver
|
Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
